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The Duke of Sussex, Sir Elton John, Baroness Doreen Lawrence and four other claimants have been told to pay Associated Newspapers Limited (ANL), publisher of the Daily Mail, an initial £9,544,355 by 28 August, after Mr Justice Nicklin ruled that costs in the failed privacy case should be assessed on an indemnity basis rather than the standard basis.
The order follows Nicklin's July 7 judgment dismissing every element of the claimants' case, which alleged ANL had engaged in unlawful information gathering, including phone hacking and the use of private investigators, over a period spanning decades. The trial ran across dozens of sitting days between January and March this year, according to the judgment handed down by the High Court.
For an insurance audience, the £9.5 million figure is less important than the basis it was calculated on. Under the standard basis, a losing party pays reasonable and proportionate costs, with any doubt resolved in their favour. Indemnity costs flip that presumption. The paying party has to show costs were unreasonable, and proportionality barely comes into it. It's a punitive mechanism, reserved for cases where a court takes a dim view of how a claim was conducted, and it tends to produce much higher bills.
Nicklin found that ANL's own claimed costs, reported in court to be in the region of £34.5 million, appeared "exceptionally high". He nonetheless declined to cap the total amount the claimants may ultimately have to pay. A stricter costs basis combined with no ceiling on the total is about as difficult a combination as after-the-event (ATE) insurers have to price for, and about as hard to reserve against accurately at the point a case is first taken out.
The claimants' seven-strong group is understood to have held a combined £16.2 million in ATE cover between them, arranged when the litigation looked far less costly than it became. Against a defence bill that grew several times over across a four-year, multi-claimant action, that leaves a gap running into eight figures. As Insurance Business UK reported when the shortfall first emerged in court, the claimants' own barrister argued the gap was partly the result of ANL raising its cost estimate well after cover had been fixed.
Nicklin was scathing about how the case had been run, criticising the claimants for pursuing "serious allegations" that lacked adequate evidential support and for failing to drop lines of attack once the evidence no longer sustained them. He also took issue with a statement issued jointly by Prince Harry and Baroness Lawrence after the original judgment, which branded the outcome a "complete and obvious whitewash", though that comment was made by only two of the seven claimants and wasn't itself part of the costs decision.
Nicholas Bacon KC, acting for the claimant group, had warned before the ruling that moving to an indemnity basis could be "very significant" for a group whose cover was calculated on the assumption that standard costs rules would apply. That warning has now played out. ANL had sought an initial payment of just under £9.95 million, the claimants had offered £8 million, and the court landed much closer to the publisher's number.
An appeal, if lodged, must be filed by 2 October, with a further deadline in early November for any notice to the Court of Appeal. The final costs bill, and how far any insurance actually responds to it, won't be settled for months yet.
This case sits at the sharper end of a trend Insurance Business UK has tracked for some time: the growth of claimant group litigation funded through a mix of conditional fee agreements and ATE cover, where the insurer, not the claimant, carries the downside risk if a case collapses.
A few things stand out for anyone underwriting similar risks. Budgets set years before trial rarely anticipate how much a defendant's costs can move once a case runs long and picks up a public profile, and this one ran for four years with an 11-week trial. The distinction between indemnity and standard costs also deserves more attention at the pricing stage than it typically gets, since it turns on a court's view of a claimant's conduct rather than the strength of the underlying claim, and that's much harder to underwrite for than merits alone. Group actions also split liability in ways that can catch cover out: each claimant here is on the hook for their own individual defence costs as well as jointly liable for the shared costs of the action, which can produce lopsided exposure even where cover looks evenly spread across a group on paper. And the ATE premium itself isn't always safe from challenge later on, as a separate ruling in a personal injury claim showed only last year.
None of that undermines what ATE cover is there to do: transfer the downside risk away from claimants who'd otherwise be priced out of court altogether. But this case is a clean illustration of how a policy limit that looked sensible when a claim was filed can end up badly undersized once a court decides, years later, that the losing side didn't just lose the case but lost it badly.
A final ruling on the total costs payable is expected in the coming months.
